On 31 January 2019, the European Securities and Markets Authority (ESMA) published a statement on EMIR implementation considerations regarding the clearing and trading obligation for small financial counterparties and the backloading requirement with respect to the reporting obligation.

Clearing and trading obligation for small financial counterparties

Under EMIR, the clearing obligation start date for counterparties in Category 3 — financial counterparties that are below €8 billion in aggregate month-end average of outstanding gross notional amount of non-cleared derivatives at group level that meet certain criteria — is on 21 June 2019, for the interest rate and credit derivative classes subject to the clearing obligation.

MiFIR exempts financial counterparties, temporarily exempted under EMIR from the clearing obligation, from the trading obligation for derivatives. With the expiration of the current Category 3 clearing obligation phase-in under EMIR, the relevant counterparties would also be subject to the trading obligation under MiFIR for those over-the-counter (OTC) derivative contracts.

The European Commission’s proposal to amend EMIR (the EMIR Refit proposal) creates a new category of financial counterparties whose derivative positions are below the clearing thresholds and that will be exempted from the clearing obligation, so-called small financial counterparties.

However, negotiations on the EMIR Refit proposal are still ongoing and it is not known when the text will apply, this may be after the phase-in for Category 3 counterparties on 21 June 2019.

ESMA is aware of the challenges that certain small financial counterparties would face to prepare for the 21 June 2019 deadline to start clearing with central counterparties, and trading on trading venues some of their OTC derivative contracts. In this respect ESMA “expects competent authorities not to prioritise their supervisory actions towards financial counterparties whose positions are expected to be below the clearing thresholds when Refit enters into force, and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.”


ESMA and national competent authorities have also been made aware of material operational challenges for reporting entities in complying with the requirements for reporting of derivatives that were outstanding on or after 16 August 2012 and terminated before the EMIR reporting start date, 12 February 2014. The process is commonly referred to as backloading. The EMIR Refit proposals remove the backloading requirement from Article 9 of EMIR.

The Commission, following the endorsement of ESMA’s draft implementing technical standards, previously extended the deadline for the completion of backloading from 12 February 2017 to 12 February 2019. However, at this stage it is unclear whether these amendments would enter into force before 12 February 2019. ESMA therefore “expects competent authorities to apply their risk-based supervisory powers in their day-to-day enforcement of EMIR in a proportionate manner. This may include not prioritising counterparties’ reporting of backloaded transactions in their day-to-day supervision and enforcement of EMIR.”